Venture capital trends in 2023

After a significant increase in venture capital funding in 2021, trends in venture capital 2023 show that these levels have continued to decline throughout 2022. Does this imply that investors are beginning to shun venture capital deals? Perhaps not necessarily. Even though today’s investors are taking a more selective approach to venture capital investments, funding remains significantly higher than in 2020. All indications point to 2023 becoming a substantial market for venture capital funding. The challenge for founders is demonstrating to investors that their businesses will generate the highest returns.

Equity crowdfunding will grow at an unprecedented rate.

Crowdfunding has grown so popular that one estimate shows more than 50% of campaigns successfully fulfill their original aims, while 78% can raise enough money to surpass their targets. This is a trend that is predicted to persist for some time. Experts believe the venture capital crowdfunding sector will reach about $43 billion by 2028.

Equity crowdfunding is one of the most prevalent categories of crowdfunding choices. Its appeal makes sense since equity crowdfunding provides investors with an instant reward in the shape of a part of ownership in the firm in return for their contribution. This form of investment takes up roughly 25% of the overall crowdsourcing business and is anticipated to increase to $25.8 billion by 2026.

Venture Capital Will Continue to Shift to International Markets

For a long time, most venture capital investment possibilities in the United States were restricted to enterprises in specific locations. In 2021, for instance, the great bulk of venture capital-backed investment in the United States was limited to a few states, including California, New York, and Massachusetts.

Since 2008, U.S.-based companies have accounted for less than half of the worldwide market for venture investments. European venture capital investments currently account for 18% of global VC financing. Southeast Asia is another hotspot for venture capital investments, producing $25.7 billion in VC funds in 2021.

Due to the expansion of worldwide VC prospects, the number of European and Asian venture capital companies also increased. This expansion makes it simpler for U.S.-based investors to increase their investment portfolios using these possibilities.

This is a fundamental shift that investors must acknowledge. In addition, these global investment possibilities are not confined to major markets in Europe and Asia; there are also chances in Latin America and Africa.

Trends to watch

The venture capital sector is adept at adjusting to changing conditions and evolving to remain at the forefront of business innovation. Here are the trends in venture capital that are most likely to influence such shifts this year.

A variety of data sources

Since some time ago, investors have considered other data sources outside press releases and financial statements when making judgments. Diversity is one of the strengths of alternative data. From credit cards to social media, satellite data to online job listings, practically anything may provide investors with valuable information.

Venture capitalists use alternative data to identify the firms that need investment the most, to construct models capable of precisely projecting the potential of a specific product or startup, and to monitor the changes in a company’s online popularity. Various data kinds provide several insights at each step of a company’s growth. Furthermore, alternative data is a trend with staying power as new forms of data develop to represent the changing reality. Consequently, this tendency will continue to influence venture capital far beyond 2023.

Investments based on sustainability

Sustainable investment, usually referred to as theme investing, has recently gained popularity. Due to the current trend of socio-political awareness at a time of global hardship, many people have been advised to invest in enterprises that will positively influence international relations, environmental issues, and, most importantly, public health issues. As investors recognise that these outcomes are not as unconnected as they may first seem, sustainable investment continues to gain traction.

This style of investment often overlaps with zebra investing. Unlike unicorn investment, zebra investing focuses on sustainable enterprises valued at less than $1 billion. Similarly, both types of investments’ environmental and social advantages attract socially conscious investors. However, these advantages also indicate that the investment has growth potential in the more conscious future we all want. This year should witness a rise in the number of investors interested in sustainable investment and the expansion of sustainable investing’s methods.

Technological advancements and automation

Consumers have always been interested in new technologies they may use to improve their lives. Also, businesses continue to employ automation to ensure efficiency and maintain competitiveness. As a result, the fintech sector has recently seen a surge in market success, as several firms and consumers have benefited from the industry’s recent innovations. Financial literacy solutions and online-only banking have been favored during the pandemic since they provide remote access, learning, and communication.

Diversification of portfolios

Geography is less of a concern to venture capitalists due to globalization and the digitalization of the investment industry. In the IT industry, for example, there has been a recent decentralization of capital away from Silicon Valley-based businesses and increased capital in cities worldwide. This trend has expanded in terms of geography and globalization, and in various ways, investors evaluate the impact of global events, movements, and directions on a portfolio. Several venture capitalists diversify their portfolios by investing in both zebras and unicorns. For instance, the pandemic and other worldwide consequences have shown investors that zebra and unicorn investments may coexist in a successful portfolio.

Cryptocurrency

Because the global blockchain industry is expected to reach $39.7 billion by 2025, it seems unlikely that cryptocurrencies will disappear soon. As part of the automation and technology adaptation trend, bitcoin may be related to the abovementioned trend. However, as a subset of fintech, it has become a trend in its own right due to its constantly rising market size. Venture capitalists have discovered that bitcoin trading offers an alternative investment strategy due to its less regulated nature than conventional investment strategies. Initial coin offerings (ICOs) are similar to initial public offerings (IPOs), enabling enterprises to obtain capital through digital currency issuance. This strategy has proven highly successful for venture capitalists and entrepreneurs seeking a more flexible investment environment.

Conclusion

Despite contradictory predictions in VC trends for 2023, we have always seen disruptive inventions during the bear market. The demand for expertise remains constant throughout the evolution of venture capital trends or as they are transformed into something more significant. Due to this, venture capital investors are likely to continue looking for new data sources and using existing data sources. At Easy Capraise, we help startups find the most suitable investors through warm intros and by preparing a top-notch pitch deck and financial model. We also provide virtual data room setups. To book a call and open investors’ checkbooks, visit Easy Capraise.

FAQ

1. Will venture capital investment get back to normal in 2023?

Even though today’s investors are taking a more selective approach to venture capital investments, funding remains significantly higher than in 2020. All indications point to 2023 becoming a substantial market for venture capital funding.

2. What type of fundraising will be best in 2023?

Crowdfunding has grown so popular that one estimate shows more than 50% of campaigns successfully fulfill their original aims, while 78% can raise enough money to surpass their targets. This is a trend that is predicted to persist for some time. Experts believe the venture capital crowdfunding sector will reach about $43 billion by 2028.

3. Can I raise funds in 2023 if I am outside of the US?

Due to the expansion of worldwide VC prospects, the number of European and Asian venture capital companies also increased.

4. In which industries will VCs invest most in 2023?

Sustainable investment, usually referred to as theme investing, has recently gained popularity. Due to the current trend of socio-political awareness at a time of global hardship, many people have been advised to invest in enterprises that will positively influence international relations, environmental issues, and, most importantly, public health issues.

5. Will VCs still invest in cryptocurrencies?

Because the global blockchain industry is expected to reach $39.7 billion by 2025, it seems unlikely that cryptocurrencies will disappear soon.